Amazon hits a bulls eye with another bricks-and-mortar deal

Amazon has reached an agreement with Target Corp. for Target to open a store at Amazon.com and for Target to take over operation of four Target Corp. web sites in the spring.

Every month, Amazon.com looks more like a multichannel retailer. The latest: a two-pronged deal with Target Corp.

Target, which revamped Target.com a year ago to get more out of its online channel, announced plans in early September to open a Target store on Amazon.com in the fall. The store is expected to expand product offerings available at Amazon.com to include apparel, home products, electronics and jewelry.

The corporation also plans to use by next summer Amazon.com’s complete solution of e-commerce technology services, order fulfillment and customer service for its current online sites including, Target.com, Marshallfields.-com, Mervyns.com and GiftCatalog.-com. Target officials said Target.com has “experienced tremendous growth in the past 12 months” and that the new store at Amazon.com provides another opportunity to expand its business.

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Under the five-year strategic alliance, Amazon.com will receive per unit fees and annual fixed fees, all of which were undisclosed. Target will receive the benefits of the Amazon.com e-commerce platform and vast online customer base to accelerate its online growth, the companies said.

Target is only one of a string of mainstream retailers and others to partner with the online giant.

Amazon has signed similar deals with Toys R Us Inc., whose web presence is only on Amazon, as well as Borders Books, whose web site Amazon operates, and Drugstore.com. “It’s no surprise to see Amazon partner with other retailers,” says Jim Okamura, senior partner at consultants J.C. Williams Group Ltd. in Chicago. “It seems to be Amazon’s quest to surround itself with highly complementary multichannel retailers.” And rightly so, according to J.C. Williams’ recent consumer research, which shows that consumers are adapting much more to the multichannel retailer environment. “This is an extremely positive move for Amazon, in terms of landing one of the best retailers, period. Target is cited often as being an innovator,” says Okamura.

While such deals further solidify Amazon.com’s e-commerce operations model, it also means diluting the brands of the retailers who partner with them. Toysrus.com’s store on Amazon looks exactly like the regular Amazon.com pages and the toy store itself has even said that it sacrificed its brand to have the prominent online presence there. “Target will cede some control of how they operate their online division. But the reality is that business rules need to be rethought,” says Okamura. “It’s always a risk to put someone else in charge of the brand but the deal would never have gone through without an extremely high level of trust in Amazon.” He suggests that Amazon may provide a spectrum of branded stores, some that look like the Amazon.com pages and some that are merely powered by the Amazon backend system and still retain their brand style.